The challenges faced by regulators and other users to analyse a lot of data, highlighted the need to streamline the process of gathering and analysing electronic data. The result was ESEF reporting which can be easily adaptable to different regulatory regimes.
The European Single Electronic Format (ESEF) Regulation applies to all issuers whose securities are admitted to trading on an EU-regulated market and requires issuers to prepare their annual financial reports in a harmonised electronic reporting format. This facilitates access to information, its analysis and comparability. The new format applies to listed companies whose financial year began on or after 1 January 2021. ESEF reporting requires:
- All annual financial reports to be prepared in XHMTL; and
- Issuers that prepare consolidated financial statements, to mark up the primary statements using inline XBRL mark-up language (ESEF taxonomy).
To enhance transparency, the requirement of block tagging the notes and accounting policies of the consolidated financial statements is effective for financial reports with financial years beginning on or after 01st January 2022.
Often termed ‘bar codes for reporting’, XBRL [eXtensible Business Reporting Language] is the open international standard for digital business reporting. It provides a language in which reporting terms can be authoritatively defined.
MFSA introduced two further obligations on issuers, to avoid any validation or technical errors when signing off the ESEF financial reports electronically, namely:
- Generation of a unique Document ID code; and
- Submission of a Directors’ Declaration on ESEF AFRs
When the ESEF AFR is successfully submitted with MFSA, this is automatically shared with the Malta Stock Exchange as the officially Appointed Mechanism in Malta.
Furthermore, the European Council and European Parliament have reached a provisional political agreement on the corporate sustainability reporting directive (CSRD) proposed by the European Commission. The CSRD will extend ESEF reporting to Environmental, Social, and Governance (ESG) reporting. Therefore, certain companies will gradually be required to digitally tag (using Inline XBRL) their sustainability reporting so that data from across Europe would be more comparable.
Reflecting the political agreement on the Corporate Sustainability Reporting Directive (CSRD), as from 1 January 2024, undertakings will be required to follow the ESEF by preparing their management reports in the XHTML format and marking-up sustainability information, including the disclosures required by Article 8 of the Regulation 2020/852 (Taxonomy Regulation) using the Inline XBRL technology.
At Zampa Partners, we can assist listed companies with the preparation of financial statements prepared under EU IFRS, mapping of the ESEF taxonomy and/or publishing the annual report in xHTML format.
The information provided in this article is accurate as of the date of last update. Please note that the scheme/s discussed may be subject to changes or expiration within a year. Readers are encouraged to verify the status of the scheme with the relevant authorities or official websites for the most up-to-date information.
Last update: 7th October 2024
Kris Bartolo
Partner
